Pound Sterling (GBP) Exchange Rates Prove Resilient on Quiet UK Data Day
Pound (GBP) exchange rates held largely steady on Wednesday morning, inching ahead against the Euro (EUR) and the US Dollar (USD) but remaining level against commodity currencies like the Australian Dollar (AUD) and the New Zealand Dollar (NZD).
Today is a quiet data day for the United Kingdom, though markets continue to assess the possible impact of UK construction giant Carillion’s collapse.
The UK government is effectively under growing pressure regarding its handling of the situation, with UK Prime Minister Theresa May now insisting that taxpayers should not have bailed out the firm.
The government is also promising to provide some support for thousands of British Carillion employees working within private-sector subsidiaries, though wages are only guaranteed until Wednesday (today) under the current contingency measures.
Markets continue to worry about the potential loss of thousands of British jobs as fallout continues, though the immediate effect on the Pound remains minimal.
GBP/EUR Exchange Rate Climbs amid Disappointing Eurozone Inflation Readings
The Pound Euro (GBP/EUR) exchange rate pushed upward on Wednesday, bolstered by the Eurozone’s disappointing latest consumer price index readings.
The Eurozone’s annual core inflation figure, which excludes the prices of energy and food and is used by the European Central Bank (ECB) in assessing monetary policy measures, was confirmed at 0.9% in December 2017, unchanged from the previous period.
The overall inflation figure similarly disappointed, this time falling from 1.5% to 1.4% year-on-year in December as a result of a softer rise in energy and unprocessed food.
This ultimately bodes ill for the ECB and indeed the Euro, as it reduces the long-term possibility of tighter monetary policy measures from the central bank.
GBP/USD Exchange Rate Stagnant, US Dollar Meanders on US Government Shutdown Fears
The US Dollar (USD) continued to remain bearish on Wednesday amid concerns that the US government may face a shutdown.
Markets are worried that Republican leaders will not make the Friday deadline to push a short-term spending bill through Congress. If they fail then federal agencies will shut their doors over the weekend – a debacle that both the Republicans and Democrats fear might alienate potential voters.
This could, in turn, hurt demand for the US Dollar – hence the current market caution.
In the meantime the GBP/USD exchange rate continued to trade within a narrow band.
Bank of Canada Rate Hike Expected, GBP/CAD Exchange Rate Unperturbed
Markets are preparing for a rate hike from the Bank of Canada (BoC) today, with forecasts pointing to a 25 basis point rise in the benchmark borrowing rate (putting it up to 1.25%).
This would mark their third benchmark interest rate hike in a year. The rate will eventually filter down and will be reflected in the rates Canadians are charged by banks and other lenders.
Despite this expectation the GBP/CAD exchange rate climbed on Wednesday morning, with markets already having priced in the coming move over the previous few days.
Another likely contributor is today’s correction in crude oil prices, with Brent crude slipping from above $70 back down towards $68.
A drop in crude oil prices tends to result in a corresponding drop in the Canadian Dollar, with crude oil being the nation’s primary export.
GBP/AUD Exchange Rates Narrow After AUS Home Loans Beat Expectations
The Australian Dollar (AUD) got a small boost on Wednesday from data revealing a significant rise in home loans.
According to figures from the Australian Bureau of Statistics home loans rose 2.1% month-on-month in November, beating the previous period’s fall of -0.6%.
The reading bodes well for the state of the Australian economy, though markets will largely be waiting for Thursday’s run of employment figures for a greater insight.
The news left the GBP/AUD exchange rate to trade within a relatively narrow band.
Global Dairy Prices Soar, GBP/NZD Exchange Rate Holds Steady
The Pound New Zealand Dollar (GBP/NZD) exchange rate held steady on Wednesday morning despite a surge in the overall average price for milk-derived commodities.
The bi-weekly Global Dairy Trade price index posted a 4.9% rise, up from the previous period’s 2.2% and marking the largest gain in over a year.
The price rise was predominantly due to New Zealand’s ongoing issues with dry weather and the knock-on reduction in the supply of dairy products.
Nevertheless, some analysts have warned that these gains might ease in the coming months as global dairy product supply continues to grow.
Amy Castleton, an analyst at AgriHQ, shared this sentiment, stating:
‘Poor milk production from NZ should be supporting prices for whole milk powder… as NZ is a key supplier. But global milk production is continuing to grow – notably that coming out of Europe and the US – so plenty more skimmed milk powder, butter and cheese will make its way onto the global market in the coming months.’